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BOJ adopts negative interest rate

January 29, 2016

The Bank of Japan has introduced negative interest rates in a bid to spur growth and prop up the world's third-largest economy. Tokyo shares surged following the surprise announcement.

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Nikkei 225 in Tokio Japan Index Wirtschaft Finanzen
Image: picture-alliance/AP Photo/E.Hoshiko

The Bank of Japan said Friday that it had decided to impose a negative interest rate of 0.1 percent on current accounts that financial institutions hold at the central bank.

"The BOJ will cut interest rates further into negative territory if judged as necessary," the BOJ said in a statement.

The bank hopes the move will encourage commercial banks to lend more and stimulate investment and growth.

It said the policy would remain in place until an inflation target of 2 percent was reached. Data earlier on Friday put Japan's core inflation rate for 2015 at 0.5 percent.

The announcement had an immediate impact on financial markets. The Japanese yen tumbled, with the US dollar rising to 120.40 yen from about 118.50 earlier in the day. Japan's Nikkei 225 stock index, which had been down about 0.8 percent at midday, shot higher.

nm/sms (Reuters, AP, dpa)

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